IB0015- Foreign Trade of India

Q1. Discuss the changes in the composition of Indias export and import since 1991. How has this affected Balance of payment situation of India? Exports from India had been more or less stagnant during 1951-60, averaging a little over Rs. 600 crores per annum. There was marginal increase in exports towards the end of Third Five Year Plan (1965-66) when the exports touched the level of Rs. 816 crores, and this level of exports doubled in seven years between 1965-66 and 1972-73. Since 1972-73, the rate of growth in exports had been so fast that in a short span of five years the level of exports reached a figure of Rs. 5142 crores in 1976-77 exceeding imports by Rs. 68 crores. This figure went up to Rs. 15674 crores in 1987-88 and Rs. 27658 crores in 1989-90. The total value of exports was Rs. 32553 crores in 1990-91. During 1986-87 to 1989-90, Indias exports increased at the annual growth rate of 17% in dollar terms or 26.5% in rupee terms. However, there was a major slowdown in export growth during 1990-91, signaling a reversal of the buoyancy witnessed in early years. The export growth in 1990-91 was very modest at 9.1% in dollar terms and 17.6% in rupee terms. On the other hand, imports continued to grow since 1955-56. As can be seen from Table 1.1 that Imports which stood at Rs. 608 crores in 1950-51, causing trade deficit of only Rs. 2 crores, increased to Rs. 1634 crores in 1970-71. The reasons for this increase were: (i) large volume of food imports. (ii) large import of capital equipment due to increase in the tempo of developmental effort, (iii) increasing requirements of maintenance imports, (iv) heavy increase in defence imports, and (v) increase in import prices. Further imports increased at a much faster rate after 1970-71 and it reached the level of Rs. 9143 crores in 1980-81 and Rs. 43198 crores in 1990-91. This to a large measure was the outcome of a nearstagnation in domestic crude oil production necessitating substantial volume of POL imports. Q2. Trading blocks play an important role in shaping worlds trade. List any five major trading blocks and explain any two of them. Five major trading blocks of the world are: 1. European Union 2. The European Free Trade Association 3. The North American Free Trade Agreement 4. Mercosur 5. The Association of Southeast Asian Nations or ASEAN European Union The European Union (EU) is a political and economic union of twenty-seven member states, located primarily in Europe. It was established in 1993, as a result of the signing of the Treaty on European Union known as the Maastricht Treaty, adding new areas of policy to the existing European Community.

With almost 500 million citizens, the EU combined generates an estimated 30% share of the world's nominal gross domestic product (US$16.8 trillion in 2007). The European Free Trade Association EFTA is a European trade bloc which was established on May 3, 1960 as an alternative for European states who were either unable to, or chose not to, join the then-European Economic Community (now the European Union). The EFTA Convention was signed on January 4, 1960 in Stockholm by seven states. Today only Iceland, Norway, Switzerland, and Liechtenstein remain members of EFTA (of which only Norway and Switzerland are founding members). Q3. Discuss the various laws governing Indias export and import trade. The following are some of the important laws governing exports from and imports into India: i) Foreign Trade (Development and Regulation) Act, 1992 The main objective of this Act is to provide for the development and regulations of foreign trade by facilitating imports into, and augmenting exports from India. This Act has replaced the earlier law namely, the Imports and Exports (Control) Act 1947. Ministry of Commerce, Government of India issues foreign trade policy under the provisions of the Foreign Trade (Development and Regulation) Act, 1992. The application of the provisions of the Foreign Trade (Development & Regulation) Act, 1992 has been exempted for certain trade transactions vide Foreign Trade (Exemption from application of Rules in certain cases) Order 1993. ii) Customs Act, 1962 This is the parent statute which details customs and excise duties stated in the Union List and regulates the import/export clearance in India. iii) Central Excise Tariff Act, 1944 This Act is basically for the goods manufactured locally in India. However, for the purposes of additional customs duty which is equivalent to the central excise duty suffered on similar goods in India, this Act must be a part of the compliance programme. The Custom Tariff Act, 1975 notifies the custom duties, exemption notifications, anti-dumping duties, safeguard and countervailing duties. iv) Foreign Exchange Management Act, 1999 Exchange control regulations are framed by the Reserve Bank of India under the provisions of Foreign Exchange Management Act, 1999. The Act came into force with effect from 1.6.2000. v) Export (Quality Control and Inspection) Act, 1963 Government of India recognized the need for effective pre-shipment inspection and hence enacted Export (Quality Control and Inspection) Act, 1963 to provide for sound development of the export trade through quality control and pre-shipment inspection. Q4. Trade policy governs export and import of a country. What are the objectives of Foreign Trade Policy 2009-2014? Discuss in brief the Duty Drawback scheme. Objectives of Foreign Trade Policy: 2009-2014 The principal objectives of the Foreign Trade Policy 2009-2014 are as follows:

1. The short term objective is to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. This is possible by achieving an annual export growth of 15% with an annual export target of US $ 200 billion by 2011 and in the next three years, i.e., by 2014 the country should be able to come back on the high export growth path of around 25% per annum. 2. The long term objective is to double Indias share in global trade by 2020. Duty Drawback (DBK) Scheme DBK assistance is provided to the exporters as a reimbursement of the incidence of excise & customs duty levied on the raw materials used for the production of the products that are exported. The Ministry of Finance, Department of Revenue announces the rates of drawback every year for each item. The Drawback is sanctioned by the Customs Department through which shipments are effected on submission of relevant documents as indicated in the drawback schedule notified by the Ministry of Finance, Department of Revenue, Government of India. Q5. Define the service providers under Foreign Trade Policy. Discuss the salient features of served from India scheme. Definition of Service Providers i) Service Provider means a person providing ii) Supply of a service from India to any other country; iii) Supply of a service from India to service consumer of any other country in India; and iv) Supply of a service from India through commercial or physical presence in territory of any other country, Supply of a service in India relating to exports paid in free foreign exchange or in Indian Rupees which are otherwise considered as having being paid for in free foreign exchange by RBI. Export Incentive for Service Providers-Served from India Scheme (SFIS) a) For foreign exchange earned during current financial year, application for Duty Credit Scrip shall be filed on monthly/quarterly/half-yearly/annual basis, at the option of the applicant to be exercised along with first application for the current financial year, with jurisdictional RA, in ANF 3B along with documents prescribed therein, for which the last date for filing application on time shall be 12 months from the end of relevant month / quarter / half-year /year periodicity. b) Service provider shall within one month of completion of imports made or expiry of validity of Duty Credit scrip whichever is earlier, submit a statement of imports made under it to jurisdictional RA with a copy to jurisdictional Excise authorities (service tax cell) wherever applicable

Q6. Write a short note on EEFC a/c. Discuss the RBI regulations relating to advance remittance for imports into India. Exchange Earners Foreign Currency Account (EEFC A/c) The EEFC Account can be maintained by any exporter with any designated branch of SBI or Public Sector Banks in India only, without prior permission of the RBI. The EEFC Account can be maintained in the form of non-interest bearing Current Account. The EEFC Account can be maintained in any of the permitted currencies. No credit facility either in India or abroad shall be available against the security of funds held in EEFC accounts. Funds held in EEFC accounts can be freely converted into Indian rupees at the market determined rates. Funds held in EEFC accounts will not be permitted to be sold/transferred to accounts of other residents in India. ADs may allow advance remittances for the Import of Goods subject to the following conditions: Importer should submit EC copy of Import Authorization for the items in the Restricted list. Remittance is made direct to the supplier. If the amount of advance remittance exceeds US$ 1, 00,000 or its equivalent, a guarantee of International Bank of repute situated outside India or a guarantee of an A.D. bank in India is required. Physical Imports of goods into India should be made within six months (3 years in the case of capital goods) from the date of remittance. In case of Non-Import, the advance remittance must be repatriated to India or used for any other permissible purpose.